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Europe's Online Ads Will Top €1.4 Billion in 2005, Forrester Forecasts

Amsterdam, Netherlands, November 25, 2003 . . . The European online display advertising market -- which Forrester defines as banner ads, sponsorships, slotting fees, interstitials, and rich media -- is set to grow at a 12 percent CAGR during the next five years, starting with 12.5 percent growth to around €793 million in 2003, according to new research unveiled today by Forrester Research (Nasdaq: FORR) at its Consumer Forum, Europe in London. By 2008, Forrester forecasts that the European display ad market alone will nearly double to almost €1.4 billion. A number of factors will drive this growth -- namely increased broadband penetration, education efforts, and simpler metrics.

"Across Europe, online display advertising will make up 1.5 percent of all advertising by 2008," said Forrester Senior Analyst Rebecca Jennings. "A few large territories still dominate the market, although all countries will enjoy compound annual growth rates in excess of 9 percent. The three biggest online display ad markets -- the UK, Germany, and France -- today will retain their crowns in 2008, with a combined €900 million of online display advertising flowing through the three markets. Continued steady increases in broadband penetration and positive overall advertising market growth will combine to push online advertising to an average 2 percent of all advertising in these markets."

Forrester calculates that the fourth- and fifth-largest online ad markets will account for almost €200 million in 2008. Italy will experience a particularly high CAGR of 12.7 percent, driven by high broadband growth; Sweden's relatively high overall ad market growth and optimistic economic outlook will drive online display ads to nearly €75 million in 2008. The remaining 12 European countries in our forecast make up some 15 percent of the European online display ad market in 2008. Some countries, such as Greece and Ireland, have yet to experience the headlong rush online that the more mature markets experienced in 1999 and 2000. These laggards exhibit the high CAGR typical of new markets. Other countries like Finland will experience continued significant growth but, due to the overall size of their economies, remain below €20 million markets.

"Crucially, other marketing tools like search, email, and classified ads also drive the growth of digital marketing," said Jennings. "These elements are likely to grow as fast as, if not faster than, online display ads. Search marketing will account for 27 percent of digital marketing spend in 2003 in the US. Search marketing, which advertisers can trial for around €100, provides a safe test bed for novice online advertisers; many of them will then gradually parlay these positive experiences into spend on display ads. Also, strenuous efforts on the part of publishers, portals, and industry representatives like the IAB that teach advertisers and media buyers about the advantages of online ads are beginning to pay off. These efforts will lure both small and large advertisers online. In addition, ease-of-use advances like standard ad formats are likely to make multisite or cross-country campaigns simpler and entice novice advertisers online. Finally, online ads will look more feasible as advertisers begin to understand what the relevant metrics for them are -- and that they don't need to track everything simply because they can. Small-scale trials with simple metrics like email addresses gathered and the inclusion of the online element into existing brand-tracking studies will persuade advertisers that online can have a measurable impact on their business."

Forrester is an independent technology research company that provides pragmatic and forward-thinking advice about technology's impact on business. Business, marketing, and IT professionals worldwide collaborate with Forrester to align their technology investments with their business goals. Forrester offers products and services in four major areas: Research, Data, Consulting, and Community. In February 2003, Forrester acquired Giga Information Group. Established in 1983, Forrester is headquartered in Cambridge, Mass. For additional information, visit www.forrester.com.

Contact:

Clive Savage
European PR Manager
Forrester Research B.V.
+31 20 305 4868
csavage@forrester.com